By Alexander Winifred
KUALA LUMPUR (Dec 22) -- Ann Joo Resources, Malaysia's largest steelmaker by market capitalization, plans to raise production by 21% to meet increasing demand from domestic infrastructure projects, its managing director said.
The company aims to produce up to 850,000 tons of steel in 2018, up from lower-than-700,000 tons in 2017 and 2016, Lim Hong Thye told Nikkei Markets. The increase in output could lift annual revenue by more than 20% if steel prices remain at current levels, he said.
"Next year, demand should pick up" after orders came in weaker-than-expected in 2017, Lim said. "This month, we can already see orders coming in pretty strongly."
Malaysia is embarking on a slew of infrastructure projects, including expansion of the mass rapid transit network and new constructions ranging from airports to expressways. The Southeast Asian nation also plans to build East Coast Rail Line, its largest railway project to-date at 55 billion ringgit.
Steel prices meanwhile have rallied as China's effort to combat pollution and curb poorer quality steel products helped in trimming supplies to the market. China's net exports of steel products could fall to 63 million tons in 2018 from around 100 million tons in 2016, according to official forecast.
Malaysian steel bar prices rose 31% on-year to 2,324 ringgit ($570.94) per ton in the third quarter ended Sep. 30 and have since added another 300 ringgit as of Dec., Lim said.
"The price of steel will only get higher if China continues its curb on steel production, in addition to the pick-up in domestic demand," Lim said.
Ann Joo is currently eyeing potential acquisitions within South-east Asia as part of its plan to expand internationally by 2020, Lim said. The company may initially invest up to 100 million ringgit to establish an overseas venture, he said.
"I see huge potential in Indonesia, which has a population of 300 million people, which could translate to 50 million tons of extra demand (every year)," Lim said. "There are already a number of existing electric-arc furnaces and rolling mills there."
Net profit in the third quarter has more-than-doubled to 47.24 million ringgit ($11.47 million) from 22.92 million ringgit a year earlier. Quarterly revenue increased 83.8% year-on-year to 595.15 million ringgit from 323.73 million ringgit, mainly due to higher selling prices of steel.
Shares of Ann Joo, which have gained 82.33%, are trading at 3.78 ringgit apiece, down 0.1%.
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